What’s a reasonable range to spend on purchasing a home for a single ERE person?

[TopHatFox]

Been trying to think about this for fun. But what would you say is a reasonable amount for a single ERE person that doesn’t want kids to spend on purchasing a home to live in?

First off, let’s determine what type of living space to purchase. For a single person with no plans of a family, that provides the option to purchase a bachelor pad, apartment studio, condo, or bungalow.

If you don’t want to deal with a rental, I would think these are the types of properties to focus on. Although a second room to rent out with someone you like is actually a pretty good idea.

Next, you’d probably want your pad to be next to town centers that offer town activities, groceries, libraries, coffee shops, and nature. Adjacent decent public transit is good too. Being next to well-educated and friendly people works.

As far as immediate move-in, I’d say it’s okay if the place needs some work. For example, patching walls, re-painting, applying a new finish to the floor boards, maybe a few updated appliances. No major issues like central air conditioning issues.

I’d personally avoid major metropolitan areas such as NYC, LA, San Francisco, and Chicago. You’d probably want to optimize property taxes and home owner’s insurance costs. So probably out west but not all the way to CA, WA, OR.

How much would that go for? I’m thinking 75-200K.

[Kriegsspiel]

First off, let’s determine what type of living space to purchase. For a single person with no plans of a family, that provides the option to purchase a bachelor pad, apartment studio, condo, or bungalow.

If you don’t want to deal with a rental, I would think these are the types of properties to focus on. Although a second room to rent out with someone you like is actually a pretty good idea.

If you think a 2nd bedroom you can rent out to a roommate is a good idea, there's no reason to count out a multi family. Or a giant Victorian with 6 bedrooms that you can turn into a Fight Club house.

Next, you’d probably want your pad to be next to town centers that offer town activities, groceries, libraries, coffee shops, and nature. Adjacent decent public transit is good too. Being next to well-educated and friendly people works.

Uh oh, prepare for Riggerjack Attack!

I agree though, I like being able to walk or ride a bike to everything I do often. MMM has a few posts about living closer to the city center.

As far as immediate move-in, I’d say it’s okay if the place needs some work. For example, patching walls, re-painting, applying a new finish to the floor boards, maybe a few updated appliances.

You should verify you can't buy a move-in ready house for less than it would cost you to fix one up. Some housing markets are weird. I bought my house in move-in ready condition for less than it would have cost me to buy any fixer-upper in the area and rehab it (I keep tabs on the market here and this still holds). Housing markets are inefficient.

That said, live in flipping is a good play.

No major issues like central air conditioning issues.

A/C isn't a major issue. Either way, major issues should be factored into the offer for the house. IE, a house with a bad roof might be a bad deal for $125,000, but a good deal at $105,000.

what would you say is a reasonable amount for a single ERE person that doesn’t want kids to spend on purchasing a home to live in? I’d personally avoid major metropolitan areas such as NYC, LA, San Francisco, and Chicago. You’d probably want to optimize property taxes and home owner’s insurance costs. So probably out west but not all the way to CA, WA, OR.

How much would that go for? I’m thinking 75-200K.

I didn't notice any cheap areas in west-but-not-Pacific-west places like Idaho and Montana. I believe Nevada (Las Vegas) had cheap properties a few years ago, but I haven't looked in a while. Tynan raves about Las Vegas. Pueblo CO also. Albuquerque looked like it had some good houses on the cheaper side last time I checked. Continue along I-40 from there and you'll travel through cheap places like OKC, Tulsa, northern Arkansas. If you want to live out west, those might be good places to look, but if you don't you'll be able to live cheaper in the Midwest.

You can find houses in great shape for under $80k throughout the huge swath of America roughly between the Mississippi River and I-95/I-81.

Also, property taxes and home insurance vary all across the country. Tennessee and West Virginia have very low property taxes, for example.

You'll probably need to narrow down your parameters a bit more and go from there.

[jacob]

If you want to be wealthy keep the housing costs around (or under) 10% of your monthly income if you rent or 10% of your NW if you buy.
If you want to be normal/middleclass, the number is ~<30% of your income. Here it is presumed that your NW goal is zilch.

[tonyedgecombe]

In the UK the cheapest housing is probably somewhere like Burnley, the bottom end of the market there is about £40/50K but that is really grim.

[C40]

In my experience/opinion, the important factors of house cost for me are:
#1 - General real estate prices in the area
#2 - Existence of small homes in the area. Most everywhere has some small homes, but there are huge ranges. Some have very few. Some have very many. In some areas (mostly in the Southwest AFAIK) many homes also have a casita on the property (a second 200-500sqft stand-alone house).

Then, one must match that up with all the other factors that matter to them about where to live. That's where it gets tricky.

One example of a place with very cheap homes and that is a pretty decent city is Wichita, KS (mid-size town, decent houses for $60-80k). There isn't a lot going on around there though. Another, with more of a big-city feel, is inside the city of St. Louis (has a pretty big-city feel, parts of the city are relatively safe with very decent houses for $100-$140k). In Tucson, prices are similar to St Louis, but with the benefit of many homes having a casita. The city is less fun, there are fewer professionals, but there is worlds better outdoors stuff right outside the city.

I would really, really like to buy a home for about 10% of my NW, but there aren't many options at that price that are in decent shape. Thus, I think about "alternative" housing types. Tents/yurts. Cabins. Tiny homes. Casitas (plus the full-size rental house I don't really want but would likely have to buy along with it).

[EdithKeeler]

I agree with Jacob re percentage of income.

I think mid-size cities are the most reasonable. Memphis repeatedly comes up as one of the cheapest places to live in terms of housing, and I can totally vouch. (Though prices are starting to go up). Lots of small houses around because of a building boom after WWII, and some in decent neighborhoods, but you have to be careful.

I think you can’t expect to get everything you want—perfect size, perfect location, in good shape, in a good neighborhood, etc., and get the price you want. You’ll likely have to compromise on something.

[chenda]

@tonyedgecombe - Remote rural rural areas can sometimes provide house prices around £40 - £50 000 in much nicer environs. Few jobs though!

[2Birds1Stone]

10% of income/NW is a great baseline. Something I've practiced since 2010 and has worked out rather favorably.

[Scott 2]

10% of net worth would certainly qualify as wealthy. I think the percent can be higher, but you also need to understand the carrying costs of a property before you can decide.


My townhouse has property taxes at $5k a year, plus association dues at $3k a year. These fixed costs force me to pay for non-ERE compatible services.

For a similar capital investment, I could move to a small home, in an unincorporated area of the same region. Property taxes would be about 60% of what I pay now, with no association dues. After home care, I might save $4k a year, effectively bumping my net worth requirement down by $100k.

I'd also note, a hidden cost of buying, is the broker's fees that come due when selling. If you do nothing, they are 6% of the property value. That has been a key consideration in keeping my non-ERE compatible townhouse while working.


Buy home you like, pay expenses, is also a naive housing strategy. One can do much better. This influences the absolute number to use.

[TopHatFox]

10%, that makes a lot of sense. Housing costs are a huge drain. Looks like as far as buying, the roommate idea is the only way to make that happen at the moment. That's interesting though, even at 600K, that means you can buy a 60K home somewhere in the midwest or a shitty neighborhood/shoe-box in the coasts. This explains why most ppl are broke to a large degree.

If I buy a small house through Zillow at some point, for example, what are closing costs like? Do I need to pay the city for the deed, or the real estate agent, or?

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70K = 7K...lol. Does anyone have a camper van I can put in the university parking lot?

Income wise, I make around 3.4K/mo, so that's....$340/mo, or my parent's spare bedroom at the moment.

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Other note, it's pretty great how one can feel wealthy if you keep to that 10% rule. The time I felt wealthiest was when I was living in my $350/mo room with a few tens of thousands and in the center of a town with tons of high-quality, free-to-me events, and all the time to peruse them.

I felt a lot less wealthy when I was spending $700/mo for a room while working and surrounded by strip malls. I can't even imagine what a $1400 apartment would feel like.

[EdithKeeler]

10%, that makes a lot of sense. Housing costs are a huge drain. Looks like as far as buying, the roommate idea is the only way to make that happen at the moment. That's interesting though, even at 600K, that means you can buy a 60K home somewhere in the midwest or a shitty neighborhood/shoe-box in the coasts. This explains why most ppl are broke to a large degree.

It's 10% of INCOME, not net worth. So if you have a net worth of $600,000 and have an income of 4% off that ($24,000), then your housing costs should be $2400/year. Which is still doable but low.... but I just wanted to clarify.

So say you pay $60,000 cash for your house. You'll still have insurance, tax and maintenance expense.

My real numbers for my house: paid $37K cash, plus another $15,000 for work when I bought the current house I live in, so call it $52K I spent for my house. My yearly expenses for my taxes and insurance are about $1300 a year (yeah, TN has low property taxes--yay!), so that part is roughly 1% of my gross income. Easy. However, repairs this year have been high--I did a remodel of my shower (it was not just cosmetic) and also put in a new tankless hot water heater--about $12,000 total, including some other small things, so now I'm over that 10% of income. Granted, it's not every year, but just something to think about. You can do a lot of stuff yourself... but some things you just can't.

Personally, my plan for when I retire is to have a separate fund for my house expenses, so it's not coming out of the main nut.

If I buy a small house through Zillow at some point, for example, what are closing costs like? Do I need to pay the city for the deed, or the real estate agent, or?

OK, you need to read up on real estate. You don't "buy thru Zillow." Zillow is just a website that lists houses available for sale. You buy from the seller. You pay the seller/their bank for the house. Not having a mortgage makes buying REALLY easy--I bought my last house sight unseen (well, my mom looked at it for me, and I had an inspection), and saves you money for closing costs, etc. Mine was a bank foreclosure, so I pretty much wrote a check and they sent me the keys; I had someone come by my office to have me notarize some documents. Some states (Texas, as I recall) require a lawyer be involved in the transaction.

[prognastat]

If you are willing to rent out rooms you can get a 3+ bedroom house and rent out the extra rooms and end up paying less than you would for a studio/1 bedroom.

This of course comes at the cost of maintenance and repair though so you'll still be spending some money and time on it that you wouldn't be otherwise.

[Dream of Freedom]

Another way to look at it is to look at what those funds would get you invested. So my house was $64000. So a swr of 4% is $2560/year. Tax is 1145. No insurance or HOA. Repairs can vary but I'll give it a hypothetical 2% of home value or 1280. $4985 in total or 415/month. Now we can compare it to what I can rent for, which is about 650/ month.

edit: I guess a lot of that kind of stuff was already gone over by EdithKeeler

[TopHatFox]

It's 10% of INCOME, not net worth. So if you have a net worth of $600,000 and have an income of 4% off that ($24,000), then your housing costs should be $2400/year. Which is still doable but low.... but I just wanted to clarify.

So say you pay $60,000 cash for your house. You'll still have insurance, tax and maintenance expense.

My real numbers for my house: paid $37K cash, plus another $15,000 for work when I bought the current house I live in, so call it $52K I spent for my house. My yearly expenses for my taxes and insurance are about $1300 a year (yeah, TN has low property taxes--yay!), so that part is roughly 1% of my gross income. Easy. However, repairs this year have been high--I did a remodel of my shower (it was not just cosmetic) and also put in a new tankless hot water heater--about $12,000 total, including some other small things, so now I'm over that 10% of income. Granted, it's not every year, but just something to think about. You can do a lot of stuff yourself... but some things you just can't.

Personally, my plan for when I retire is to have a separate fund for my house expenses, so it's not coming out of the main nut.

That's great that houses can be so cheap. $50,000 for a house sounds great. Most of the houses around Miami are $200K, but it's probably simply for the proximity to Miami. But then there are the 1-10M dollar houses that make everyone feel inadequate and think 500K is reasonable. The houses themselves are nothing special I think. In a way I'm kinda sad that my parents spent a large part of the past two decades working to pay maybe 1/3 of a $250K mortgage on an annual combined salary of 40-50K, not to mention a 20K commercial van and a leased SUV. : (

What if they had moved to a state like Tennessee and bought a 50K house and two used little Toyota Yaris cars?

[TopHatFox]

This is interesting. Do most of you buy houses in the 30-100K range? I feel like my co-workers have skewed my percetion of a "normal" house to be 250-400K.

[Kriegsspiel]

That's great that houses can be so cheap. $50,000 for a house sounds great. Most of the houses around Miami are $200K, but it's probably simply for the proximity to Miami. But then there are the 1-10M dollar houses that make everyone feel inadequate and think 500K is reasonable. The houses themselves are nothing special I think. In a way I'm kinda sad that my parents spent a large part of the past two decades working to pay maybe 1/3 of a $250K mortgage on an annual combined salary of 40-50K, not to mention a 20K commercial van and a leased SUV. : (

What if they had moved to a state like Tennessee and bought a 50K house and two used little Toyota Yaris cars?

This is interesting. Do most of you buy houses in the 30-100K range? I feel like my co-workers have skewed my percetion of a "normal" house to be 250-400K.

A lot of the people who live in HCOL areas really do not understand how inexpensive quality housing is in most of the country.

I bought my house for under $70,000, it's quite nice. You can do that all over.

[prognastat]

The range across the US is quite astounding considering in some places you could find a reasonable house for 50k and in other locations you would struggle to find one for under 500k.

[Bankai]

My (half) of the mortgage payment is ~8% of my net income. Including mandatory taxes etc. it's ~12%. This was achieved by buying in a relatively inexpensive location in a relatively inexpensive city (in the UK). So I kinda meet the 10% of income target. However, I don't plan to accumulate 5x the value of our apartment to meet the 10% of NW target before retiring. In fact, I expect my (half) of paid off apartment to be ~25% of my NW when retiring. I don't see how 10% of NW is a realistic or necessary goal, considering housing tends to be the biggest expense (often greater than all other combined). Unless for someone mobile or living with multiple people or accumulating until <2% SWR or choosing a really sad place to live.

[TopHatFox]

I'm still a little unclear on how the 10% rule of thumb works. So 10% of INCOME is the key point.

So if I make 50K a year, I should only spend 5K/yr on housing, right? (whether that 5K is used on renting a room, mortgage/interest payments, a parking spot, etc.)

I think where I get lost is on the imputted rent piece. What if I bought a house for 30K and then spend 5K on owning expenses like property taxes. Am I still meeting the 10% rule, or am I exceeding it because of the opportunity cost of the 30K? (i.e. 30K * .04 = 1.2K + 5K = 6.2K, which is actually 12% of a 50K income)

And what if I have a 200K portfolio earning 8K/yr to live off of. That means my income is 8k/yr, and I can use $800/yr on housing. Seems like the rule is broken in that case?

[Bankai]

What if I bought a house for 30K

If you buy for $30k, you fail the 10% NW rule, unless you happen to have another $270k.

And what if I have a 200K portfolio earning 8K/yr to live off of. That means my income is 8k/yr, and I can use $800/yr on housing. Seems like the rule is broken in that case?

I think the 10% income rule only applies during accumulation. It's pretty much impossible to pull off spending only 10% of passive income on housing (while renting) unless your SWR is crazy low.